Amid Inquiry, Chief of Italy's Central Bank Resigns

By IAN FISHER and ERIC SYLVERS; Eric Sylvers reported for The International Herald Tribune for this article.

Published: December 20, 2005

It was a drama that engrossed Italy's political and financial circles.

Antonio Fazio, the governor of the Bank of Italy, was at the center of a storm over efforts by foreign banks to buy an Italian bank. His late-night phone calls were wiretapped. Even his wife's conversations with a top Italian bank executive were tapped. And yet for six months he still refused calls from the prime minister and others to step down.

Until Monday.

Mr. Fazio, who had lifetime tenure since his appointment to the post in 1993, had become one of the most powerful officials in Europe. An esteemed economist, he enjoyed a good reputation during his first decade running an institution considered above Italy's political fray.

But his standing -- and that of the central bank both inside and outside Italy -- began a steep descent in July, when the Italian press began publishing the text of conversations that had been wiretapped.

Those phone calls suggested that Mr. Fazio had been trying to help an Italian suitor outmaneuver a foreign one in the takeover of Banca Antonveneta.

''Finally,'' Emma Bonino, leader of the Radical Party, told reporters here, echoing the sentiment and relief among many of Italy's leaders.

The scandal surrounding Mr. Fazio revolved around several traditional Italian fault lines, from corruption to the carte blanche power and influence that the country's institutions appear to wield, without being held accountable. As Mr. Fazio was a faithful churchgoer, even the influence of the Roman Catholic Church played a role.

Mr. Fazio has denied any wrongdoing, and his supporters say he had properly defended foreign takeovers of Italian banks.

The reputation of the Bank of Italy, however, is not likely to immediately recover with Mr. Fazio's resignation. His departure comes at a time when the nation itself is mired in serious economic problems that have sapped trust in its leaders.

The European Union's executive commission said that a legal action it had filed against Italy over the bank takeover remained in place. Prime Minister Silvio Berlusconi is scheduled to meet today with his cabinet to discuss a law that would strip away some of the nearly unlimited powers that bank governors now have -- powers that seemed to prolong the crisis over Mr. Fazio.

Mr. Fazio, who is 69, managed for months to fend off nearly unanimous calls to resign, but he found himself in a precarious situation last week, after prosecutors began investigating him for insider trading. The Italian press also reported that Mr. Fazio and his family had accepted thousands of dollars in gifts from the head of an Italian bank, which the Bank of Italy was responsible for regulating, that was also bidding for Banca Antonveneta.

Mr. Fazio's political support seemed to wear away, as displeasure mounted at the European Central Bank and as the Italian finance minister developed legislation to depose him. Finally on Monday, the Bank of Italy released a statement announcing his resignation.

''The decision, made autonomously and with a clean conscience, was taken to restore calm, in the greater interest of the country and the Bank of Italy,'' the bank said. The bank board is to act officially on the resignation in a meeting today.

Bank governors are now appointed essentially for life, and can be removed only with a vote of 9 of the 13 members of the bank's Superior Council. That has never happened in the bank's 113-year history.

Mr. Berlusconi's proposal would create renewable five-year terms and remove some of the governor's regulatory powers.

Mr. Berlusconi was once a keen supporter of Mr. Fazio, but in September also asked him to resign. On Monday, he avoided making any harsh statements against Mr. Fazio.

''It was important to make this gesture to return serenity to the Bank of Italy,'' Mr. Berlusconi said on an Italian talk show. ''Fazio is an honest person, and he didn't resign for a while probably because he didn't want to look like he had done something wrong. Fazio has served his country well.''

The European Central Bank, which stepped up pressure last week for Mr. Fazio to resign, said in a statement, ''This was the best decision to take in the superior interests of his country and of the Bank of Italy.''

Mr. Berlusconi said he did not know who would replace Mr. Fazio. But several names were being mentioned by experts. Among them are: Tommaso Padoa-Schioppa, a former board member of the European Central Bank; and Mario Draghi, a former director-general of the Italian treasury and managing director in Italy for Goldman Sachs since 1992.

Mr. Fazio is a man who attends Mass every day. He is also an expert on St. Thomas Aquinas and a fund-raiser for religious charities. With the latest accusations of gifts and insider trading, even Mr. Fazio's longtime supporters in the church had begun to drop him.

Mr. Fazio's public piety seemed at odds with the image that emerged in July. At that time, taped conversations were published showing a close, even cozy, relationship between him, his wife and Gianpiero Fiorani, then the chief executive of Banca Popolare Italiana, which at the time was locked in a rivalry with a Dutch bank, ABN Amro, to take over Banca Antonveneta.

''I just put my signature on it,'' Mr. Fazio was recorded as telling Mr. Fiorani in a midnight phone conversation regarding the final approval of the takeover.

Mr. Fiorani replied, ''I've got goose bumps,'' and added, ''I'd give you a kiss right now, on the forehead.''

Initially it seemed possible that Mr. Fazio had broken European Union laws by favoring Popolare Italiana over ABN. But media reports say that prosecutors in Milan eventually decided to investigate him on suspicion of giving Mr. Fiorani crucial information before it was made public.

The investigation came amid Mr. Fiorani's arrest last week on charges of running a corruption ring that defrauded the bank's clients, paid kickbacks to politicians and made millions of euros on insider trading deals. Media reports say that Mr. Fiorani showered Mr. Fazio and his family with gifts -- totaling more than 50,000 euros ($60,000) -- that are now the subject of official scrutiny.

Over the weekend, prosecutors interviewed Mr. Fiorani for 14 hours and, according to the Corriere della Sera newspaper, the former banker acknowledged having 70 million euros ($84 million) in bank accounts in Britain and Singapore and 130 million euros ($156 million) in real estate and other assets.

Mr. Fiorani, according to the newspaper, is cooperating with prosecutors, has offered to pay back all the money and said Mr. Fazio knew about his illegal dealings.

Until Italy chooses a new bank governor, the daily operations will be run by Vincenzo Desario, its director general since 1994.

Photos: The face of Antonio Fazio loomed behind Prime Minister Berlusconi on Italian TV yesterday. (Photo by Alessia Pierdomenico/Reuters)(pg. C1); Antonio Fazio leaving a church in Rome yesterday, the day he stepped down as governor of the Bank of Italy in the wake of mounting pressure. (Photo by Andreas Solaro/Agence France-Presse -- Getty Images)(pg. C2)